Paying for nursing home care

by Barbara Coenson

People are living longer today. Alzheimer’s disease and dementia are on the rise. Walkers are replacing treadmills. Nearly half of all Americans spend their final years in a nursing home and the numbers are expected to increase as the baby boomers enter their senior years. Yet, few Americans can afford to pay $5,000 – $15,000 monthly to move a loved one into a nursing home.

How would you pay for nursing home care?
There are three choices available: 1) paying out of your own pocket, 2) long-term care insurance, or 3) Medicaid. Most people cannot afford to pay out-of-pocket for nursing home care. The expense can drain your assets in a matter of months, jeopardizing the financial security of your family. Long-term care insurance is a viable option for people who plan early and can afford the cost of coverage.

For many people, the primary funding source for nursing home care is Medicaid. Medicaid is a combined federal and state assistance program designed to help cover nursing home expenses for qualified individuals. Becoming eligible for Medicaid requires a thorough understanding of the qualifications, eligibility rules, legal strategies, and application process.

Who is eligible?
Medicaid coverage for nursing home care is available to U.S. citizens or qualified aliens who are age 65 or older, or blind, or disabled. To qualify, an applicant must reside in a Medicaid-approved nursing home and require assistance with daily living activities such as walking, dressing, feeding, toiletry, and bathing.

To be eligible for Medicaid nursing home benefits, an income and asset test must be met. Too much income can delay or disqualify someone from receiving Medicaid nursing home benefits; however, strategies exist to help a person meet the income test. For example, if your 67-year-old father exceeds the Medicaid monthly gross income limit of $1,869, he can still qualify for Medicaid by depositing excess income into an irrevocable income trust. If he is married, he may divert some or all of his income above the $1,869 to his spouse to meet the Medicaid income limit.

Managing assets to meet eligibility requirements may involve implementing several strategies. The Medicaid asset limit is $2,000 for the applicant, but some assets are excluded, such as a home (some limits apply), a car used by a spouse or child living at home, prepaid burial plans, some life insurance policies, and the property value of income-generating property. Almost every other type of asset is counted when determining Medicaid nursing home eligibility. There is no cookie-cutter plan that works for everyone, so individual planning is essential. Possible strategies include:

  • Transferring assets to a spouse if the spouse’s assets (excluding home, car, etc.) do not exceed $101,640 during the application period.
  • Converting assets counted by Medicaid into assets not counted by making home improvements, purchasing a new car, or a buying a prepaid burial plan.
  • Making a qualified distribution to a third party for the care and support of the spouse.
  • Contracting with a family member to provide care and maintenance for the Medicaid applicant.

Wouldn’t it be easier just to give everything away?
You cannot simply give assets away to qualify. For example, if your 72-year-old mother gives assets to someone other than her spouse for less than fair market value, she will be disqualified from receiving Medicaid nursing home benefits for a specific period of time. The disqualification period for gifts is calculated by dividing the value of the gifts made prior to application by the state’s calculated monthly cost of nursing home care in Florida. The result is the number of months she will have to wait until she becomes eligible for Medicaid nursing home benefits. While waiting for the disqualification period to end, she has to pay her own nursing home bills.

Once qualified, can you lose benefits?
A Medicaid recipient can lose benefits if income or assets unexpectedly increase above the set limits. For example, if your father is a Medicaid recipient and your mother dies before him leaving him assets, then he could lose his Medicaid benefits. Other unexpected sources of income, life insurance proceeds, legal awards, or inheritances can also adversely affect Medicaid benefits. Proper Medicaid planning looks beyond just meeting eligibility requirements and considers safeguarding those benefits as well.

If you have a parent, spouse, or child in need of nursing home care but cannot afford to pay the nursing home bills, then Medicaid nursing home benefits may be a viable option. The requirements may seem rigid, but there are strategies to enable your loved one to qualify for the benefits. Proper Medicaid planning is important before applying to ensure eligibility without jeopardizing the financial security of your family.

Some Florida Medicaid laws may be modified to comply with new Federal regulations. Please consult a Medicaid attorney to learn more about Medicaid planning.


Lake Mary Life, 2007


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